Florida lags other states in distributing Hardest Hit money to homeowners

July 13, 2014|By Mary Shanklin, Orlando Sentinel

Halfway to the deadline for spending federal Hardest Hit foreclosure-relief funds, Florida has distributed less than a third of its $1 billion share and lags most other states in getting the money into homeowners' hands.

Of 18 foreclosure-troubled states that were given Hardest Hit money in 2010, six have exhausted their funds. Across the country, 40 percent of Hardest Hit dollars had been distributed by the end of the first quarter. Nevada, which often rivals Florida for having the nation's biggest share of underwater homes, had spent 48 percent of its funds.

But in Florida, which led the U.S. for foreclosure activity in May, only 31 percent of the funds had been granted to qualified homeowners by the end of the first quarter, according to reports filed with the U.S. Treasury.Among the worst foreclosure states, only Arizona had spent less: 27 percent.

"Initially, even before I was even on the board, our underwriting parameters were conservative compared to those other states, so our money has gone out a little more slowly," said Bernard "Barney" Smith, chairman of the board of the Florida Housing Finance Corp., which oversees the state's money.

States have until December 2017 to spend their share or lose unspent funds. Florida has several programs for disbursing the aid, including mortgage relief for unemployed and underemployed homeowners and assistance for older homeowners who tapped the equity of their homes with reverse mortgages.

Florida's pace of spending has increased sharply since September, when the state launched a principal-reduction program that grants qualified homeowners as much as $50,000 if they owe more on their home than it's worth and are current on mortgage payments. Since then, the number of Floridians getting some kind of Hardest Hit assistance has exceeded 16,000, doubling in just a year.

But one critic of the program said Florida is behind in spending the money because principal reduction was rolled out too late.

Winter Park real-estate broker Alvin Moore said the state erred in waiting until the economy was recovering before launching its most meaningful foreclosure-relief program. Moore, who specializes in selling distress houses to first-time buyers, said it could have made a difference for homeowners during the depths of the economic downturn.

"They kind of missed the boat. The state did a poor job of getting the money out there," he said. "If we're not getting rid of this money and we are in the top two or three states for foreclosures, that really shows you a real inability to manage the program."

Florida has been at or near the top of foreclosure rankings nationally since the state's real-estate bubble burst in 2007. As recently as May, Florida led all other states for foreclosure notices and auctions, according to RealtyTrac. Hardest Hit dollars were distributed to states with the greatest foreclosure problems.

Cecka Green, a spokeswoman for the Florida Housing Finance Corp., said some states have gone through their money more quickly than Florida, but they had less to distribute and may not have tried to allocate the money through a variety of programs.

"We didn't just shovel money out the door," she said. "We can't win for losing. If we had encumbered more of the funds, then we would have been called haphazard in our approach. But we've been very deliberate and thoughtful, reaching people who needed it."

After a sluggish start to its Hardest Hit program, the state had high hopes for its principal-reduction rollout. But by the first quarter, it had spent only about $73 million of the $350 million it had targeted. And more than half the applicants had been denied, primarily for exceeding income limits.

The management of Florida's Hardest Hit money has come under fire from the office of U.S. Sen. Bill Nelson, D-Fla. The Treasury Department regularly reviews how states are spending the money. The most recent review of Florida's spending found that at least a few homeowners got more money than they should have because of miscalculations.

Of six homeowner loans reviewed, three granted too much assistance, the review found. In the small sample, one of the owners received $973 of additional assistance over a seven-month period because of the errors.

The housing group responded by providing additional training during a webinar for the housing counselors and advisers who are processing applications.

Compared with other states getting the funds, Florida has had one of the highest rates of applicants withdrawing from the process. About 37 percent of those who sought aid withdrew their applications. Nationally, about 24 percent of applicants withdrew. The reason so many dropped out is unclear but could indicate that their economic situation had improved or that the value of their home grew to the point that they had some equity.

Seminole County resident Stacy Kirk said she pulled out because the housing counselor handling her application repeatedly asked for the same documents, and she was concerned about the security of her financial information.

Green, the communication director for the state housing group, said the number of withdrawals may be inflated because some applicants who withdrew from the process early on were later reconsidered and approved under new programs that worked for them. In addition, Florida may define withdrawals more broadly than other states.

She said the state is headed in the direction of spending all of its funds before the deadline in 2017.